In re Marriage of Oliverez (2015) __, Cal.App.__, Case No. H040955, involves a dissolution action between Appellant Donna Oliverez (Donna) and Respondent Mark Oliverez (Mark). Mark contended that they had reached a marital settlement agreement, but Donna disputed this and contended it was merely a proposed settlement agreement (hereafter "the Agreement"). Mark filed a motion to enforce judgment pursuant to Code of Civil Procedure section 664.6. The trial court denied the motion, finding the Agreement unenforceable. Thereafter, the case was reassigned to a different trial court judge. After a trial on the merits, the court reconsidered and vacated the first trial judge's finding that the Agreement was unenforceable. Donna appealed.
A trial court's discretion to reconsider another judge's prior ruling is necessarily narrow and usually only appropriate when the prior judge is unavailable. (Curtin v. Koskey (1991) 231 Cal.App.3d 873, 876-878 (Curtin).)
Code of Civil Procedure section 1008 governs parties' motions for reconsideration and their renewal of prior motions. It expressly specifies and limits the court's jurisdiction to reconsider a prior ruling or to entertain a renewed motion when such relief is sought by a party. A motion for reconsideration by a party must be filed within "10 days after service upon the party of written notice of the entry of the order" and the motion may be granted only "upon new or different facts, circumstances, or law," which matters must be shown by affidavit as part of the motion. (§ 1008, subd. (a).) Section 1008 governs parties' motions for reconsideration or their renewal of a prior motion "whether the order deciding the previous matter or motion is interim or final." (§ 1008, subd. (e).)
In Le Francois, the California Supreme Court considered whether, notwithstanding the provisions of section 1008, a trial court may "reconsider interim orders it has already made in the absence of new facts or new law [.]" (Le Francois v. Goel (2005) 35 Cal.4th 1094, 1101 (La Francois).) In that case, the defendants brought a renewed motion for summary judgment based on the same grounds as their first motion. Vacating the prior ruling of the first trial judge, a second trial judge granted the renewed motion for summary judgment. (Id. at p. 1097.) The Supreme Court reversed on the ground that the defendants did not meet the statutory requirements for a motion for reconsideration. (Id. at p. 1109.) However, the court interpreted section 1008 "as imposing a limitation on the parties' ability to file repetitive motions, but not on the court's authority to reconsider its prior interim rulings on its own motion." (Id. at p. 1105, fn. omitted.) Thus, if the statutory requirements under section 1008 are not met, "any action to reconsider a prior interim order must formally begin with the court on its own motion." (Id. at p. 1108.) Here, the trial court, in its "Tentative Ruling on Court Trial," and later by formal notice, stated that it would reconsider the prior order on the Agreement on its own motion. Thus, although the trial court did not consider any new facts or new law, under Le Francois, it had the inherent authority to reconsider a prior interim order. (Ibid.)
However, Le Francois did not resolve the question of whether one trial judge may reverse the ruling of another trial judge. In Le Francois, the Supreme Court noted that the "Court of Appeal held that because the motion was transferred [to another judge] without objection, plaintiffs could not challenge the propriety of that transfer on appeal." (Le Francois, supra, 35 Cal.4th at p. 1097, fn. 2 (italics added).) The question of "when and under what circumstances one judge may revisit a ruling of another judge" was thus not on review, and the Supreme Court specifically left open that question. (Ibid.)
Generally, one trial court judge may not reconsider and overrule an interim ruling of another trial judge. (Curtin, supra, 231 Cal.App.3d 873; Ziller Electronics Lab GmbH v. Superior Court (1988) 206 Cal.App.3d 1222, 1232 (Ziller); Morite of California v. Superior Court (1993) 19 Cal.App.4th 485, 493.) "This principle is founded on the inherent difference between a judge and a court and is designed to ensure the orderly administration of justice. 'If the rule were otherwise, it would be only a matter of days until we would have a rule of man rather than a rule of law. To affirm the action taken in this case would lead directly to forum shopping, since if one judge should deny relief, defendants would try another and another judge until finally they found one who would grant what they were seeking. Such a procedure would instantly breed lack of confidence in the integrity of the courts.' [Citation.]" (In re Alberto (2002) 102 Cal.App.4th 421, 427.) "For one superior court judge, no matter how well intended, even if correct as a matter of law, to nullify a duly made, erroneous ruling of another superior court judge places the second judge in the role of a one-judge appellate court." (Ibid.)
However, there are narrow exceptions to this general rule. (See In re Alberto, supra, 102 Cal.App.4th at p. 430.) "[W]here the judge who made the initial ruling is unavailable to reconsider the motion, a different judge may entertain the reconsideration motion." (Ziller, supra, 206 Cal.App.3d at p. 1232.) Another exception is when the facts have changed or when the judge has considered further evidence and law. (People v. Riva (2003) 112 Cal.App.4th 981, 992-993 (Riva); Tilem v. City of Los Angeles (1983) 142 Cal.App.3d 694, 706.) Additionally, a second judge may reverse a prior ruling of another judge if the record shows that it was based on inadvertence, mistake, or fraud. (Church of Scientology v. Armstrong (1991) 232 Cal.App.3d 1060, 1069 (Armstrong).) Mere disagreement, as here, with the prior trial judge's ruling, however, is not enough to overturn that ruling. (Riva, supra, at p. 992.)
No exception was established here. Additionally, the appellate court found that not only was the decision to overrule the prior ruling erroneous, but it also resulted in prejudice to Donna. The decision to overrule the first court’s decision came three years after the original ruling. As a consequence, both parties continued to litigate many of the issues that had been addressed in the Agreement over the course of three years, conducted a 15-day trial, and expended considerable time and resources. The parties did so in reliance on the original ruling that the terms of the Agreement were unenforceable. This reliance was reasonable. (Cf. Greene v. State Farm Fire & Casualty Co. (1990) 224 Cal.App.3d 1583, 1592.
Therefore, the appellate court held that under the circumstances of this case, once the court had determined that the Agreement was unenforceable, Donna had the right to believe the ruling was definitive. It follows that the reconsideration of the prior ruling on the Agreement resulted in unfairness to Donna and the case is reversed and remanded.
Wednesday, September 30, 2015
Monday, September 28, 2015
In re Marriage of Evilsizor and Sweeney: Family Law restraining order did not violate free speech.
In In re Marriage of Evilsizoer and Sweeney (2015 _Cal.App.__, Case No. A142396, Appellant Joseph Sweeney (Sweeney) downloaded the contents of respondent Keri Evilsizor's (Evilsizor) cell phones around the time that Evilsizor gave birth to the couple's daughter. After these dissolution proceedings were initiated a few months later, Sweeney filed with the court copies of some downloaded text messages. Evilsizor sought a restraining order under the Domestic Violence Prevention Act (DVPA) to stop Sweeney from further disseminating the downloaded information. The trial court heard testimony from the parties and found that Sweeney's actions amounted to abuse under the DVPA; thus, the trial court prohibited Sweeney from distributing this information without first receiving the court's permission.
At a hearing on April 11, 2014, Sweeney, Evilsizor, and Evilsizor's father testified. Evilsizor testified that it had been "incredibly incredibly difficult to deal with" the dissemination of her personal information, stating, "I have sleepless nights. I'm sick to my stomach. My friends are mad at me, embarrassed as if I let him. I didn't know he was even doing any of this. My parents are upset, you know. Why did I marry him? I didn't know that things were going-I didn't know. Yeah. It's been incredibly challenging to live with." She further testified that she had suffered shock and embarrassment and feared for her safety because of the disclosure. Evilsizor also was concerned about Sweeney's threats to reveal information to the Internal Revenue Service about "things [she] didn't do."
After the close of evidence, the trial court remarked that the narrow issue to decide was whether there was a need to prevent dissemination of the information from Evilsizor's phones. It stressed, "I'm not making any conclusive decision about whether they [the text messages] were properly acquired. I'm not deciding what [e]ffect it has on attorney/client privilege or on the presence of [Sweeney's former attorney] in the case." The court concluded that even if Sweeney legally obtained Evilsizor's information, an issue left unresolved, it was authorized under the DVPA to enjoin the disclosure or threats of disclosure of the information to protect Evilsizor's peace of mind. The court ordered Sweeney be "prohibited from using, delivering, copying, printing or disclosing the messages or content of [Evilsizor's] text messages or e-mail messages or notes, or anything else downloaded from her phone or from what has been called the family computer except as otherwise authorized by the court." Sweeney also was prohibited from trying to access or otherwise interfere with Evilsizor's internet-service provider accounts or social-media accounts. The trial court's order expires on April 11, 2019. Sweeney timely appealed.
At the time Evilsizor sought and obtained the restraining order, the DVPA authorized a trial court "to restrain any person for the purpose of preventing a recurrence of domestic violence and ensuring a period of separation of the persons involved" if evidence showed "reasonable proof of a past act or acts of abuse." (Former § 6300.) A court may issue an order enjoining specific acts of "abuse" (§ 6218, subd. (a)), which are defined as, among other things, behavior that could be enjoined under section 6320. (§ 6203, subd. (d).) Section 6320, in turn, permits a court to enjoin a party from engaging in various types of behavior, including "disturbing the peace of the other party." (§ 6320, subd. (a).) "[T]he plain meaning of the phrase 'disturbing the peace of the other party' in section 6320 may be properly understood as conduct that destroys the mental or emotional calm of the other party." (In re Marriage of Nadkarni (2009) 173 Cal.App.4th 1483, 1497 (Nadkarni).) The phrase includes "destroying the mental or emotional calm of [a former spouse] by accessing, reading and publicly disclosing her confidential e-mails." (Id. at p. 1498.)
The appellate court rejected several arguments from Sweeney. First, the court rejected Sweeney's argument that the trial court misapplied Nadkarni, supra, 173 Cal.App.4th 1483 in determining that Sweeney's actions constituted "abuse" under the DVPA. In Nadkarni, a former wife alleged that her ex-husband had accessed her private e-mail account while she was away on a business trip, then attached copies of the e-mails to documents filed in proceedings regarding custody of their teenaged children. (Id. at pp. 1487-1488.) She sought a permanent restraining order, but the trial court denied it without a hearing after finding that the DVPA did not cover situations in which there was no physical harm alleged. The appellate court reversed and remanded the matter to the trial court for a hearing. It held that the definition of abuse under the DVPA is not limited to the infliction of physical injury or assault. (Id. at pp. 1498, 1501.)
The trial court relied on Nadkarni in ruling that it was not necessary for Evilsizor to prove physical abuse to obtain a restraining order and that "the disclosure of various communications can constitute disturbing the peace of the other party within the meaning of the domestic violence statute." The court ultimately concluded that Sweeney had disturbed Evilsizor's peace under Nadkarni, "because you're going around either disclosing or threatening to disclose to third parties for no particular reason intimate details of your lives, . . . and that's what I think is happening here."
Although a lack of past physical abuse may be considered by a trial court in considering a protective order, the DVPA's definition of abuse "is not confined to physical abuse but specifies a multitude of behaviors which does not involve any physical injury or assaultive acts." (Eneaji v. Ubboe (2014) 229 Cal.App.4th 1457, 1464; see also Burquet v. Brumbaugh, supra, 223 Cal.App.4th at pp. 1142-1143, 1146-1147 [substantial evidence supporting DVPA restraining order where there was no evidence of physical abuse, but restrained party disturbed peace of ex-girlfriend by e-mailing her, sending her text messages, and showing up unannounced at her home]; Conness v. Satram (2004) 122 Cal.App.4th 197, 201-202 [no evidence of physical injury needed under DVPA].)
Second, Sweeney's reliance on S.M. v. E.P. (2010) 184 Cal.App.4th 1249 was unpersuasive. In that case, the appellate court concluded, without analyzing the "disturbing the peace" definition of "abuse" (§ 6320, subd. (a)), that the trial court's description of the restrained party's behavior did not support a finding of abuse. (S.M., at p. 12604.) In fact, the trial court's statement that it would wait to see if there were "more incidents" before it relied on the presumption under section 3044, subdivision (a) that child custody would not be in the best interests of the restrained person's child suggested the trial court believed the restrained person "would have to engage in some additional behavior before the court would find that he engaged in domestic violence." (S.M., at p. 1268, original italics.) Here, by contrast, the trial court specifically found that Sweeney's behavior fell within the DVPA.
At oral argument before the appellate court, Sweeney suggested that his conduct was not sufficiently egregious to warrant the entry of the DVPA order, especially since the order will have the particularly serious consequence of creating a rebuttable presumption in the ongoing child-custody dispute that his child's best interest would not be furthered by him being awarded custody. (§ 3044.)
But the appellate court noted that the presumption is rebuttable by a preponderance of the evidence, and the trial court can and will properly consider and weigh the evidence in the child-custody proceedings to determine whether it should be overcome, taking into account factors that may be favorable to Sweeney (§ 3044, subds. (a)-(b)), understanding that there was no finding Sweeney was physically violent, and focusing on the best interest of the child. The trial court previously has acknowledged the applicable rebuttable presumption at a hearing on April 17, 2014, when it stated that section "3044 says what it says. There is an automatic presumption. It's not a separate finding that I make. That presumption can be rebutted. And we will go through all of that at the appropriate time." (Italics added; see also Keith R. v. Superior Court (2009) 174 Cal.App.4th 1047, 1056 [domestic-violence orders "often must issue quickly and in highly charged situations" but should not be "misuse[d] . . . for tactical reasons"].)
Third, the court rejected Sweeney's argument that insufficient evidence supports the trial court's order. Although the parties disputed certain aspects of the events that led to the issuance of the restraining order, the trial court was in the best position to evaluate credibility and to resolve factual disputes, and our review of the record reveals sufficient evidence to conclude that the court's order was not an abuse of discretion. (Burquet v. Brumbaugh, supra, 223 Cal.App.4th at p. 1143.)
Fourth and finally, the appellate court rejected Sweeney’s argument that the trial court’s order was an improper prior restraint on his constitutional rights to free speech. The appellate court rejected this argument because Sweeney's ability to continue to engage in activity that has been determined after a hearing to constitute abuse is not the type of "speech" afforded constitutional protection.
The First Amendment to the United States Constitution provides: "Congress shall make no law . . . abridging the freedom of speech . . . ." "This fundamental right to free speech applies to the states through the Fourteenth Amendment's due process clause." (Aguilar v. Avis Rent A Car System, Inc. (1999) 21 Cal.4th 121, 133-134 (plur. opn. of George, C.J.) (Aguilar).) " '[P]rior restraints on speech and publication are the most serious and the least tolerable infringement on First Amendment rights.' [Citation.] 'The term prior restraint is used "to describe administrative and judicial orders forbidding certain communications when issued in advance of the time that such communications are to occur." [Citation.] . . . . [P]ermanent injunctions-i.e., court orders that actually forbid speech activities-are classic examples of prior restraints.' " (DVD Copy Control Assn., Inc. v. Bunner (2003) 31 Cal.4th 864, 886, original italics.) " 'The special vice of a prior restraint is that communication will be suppressed, either directly or by inducing excessive caution in the speaker, before an adequate determination that it is unprotected by the First Amendment.' " (Ibid., quoting Pittsburgh Press Co. v. Pittsburgh Comm'n on Human Relations (1973) 413 U.S. 376, 390.)
"Although stated in broad terms, the right to free speech is not absolute." (Aguilar, supra, 21 Cal.4th at p. 134.) " '[T]here are categories of communication and certain special utterances to which the majestic protection of the First Amendment does not extend because they "are no essential part of any exposition of ideas, and are of such slight social value as a step to truth that any benefit that may be derived from them is clearly outweighed by the social interest in order and morality." ' " (Balboa Island Village Inn, Inc. v. Lemen (2007) 40 Cal.4th 1141, 1147 (Lemen), quoting Bose Corp. v. Consumers Union of U.S., Inc. (1984) 466 U.S. 485, 503.) Such categories include libelous speech (Lemen, at p. 1147) and words amounting to employment discrimination (Aguilar, at pp. 134-135, 141-142).
Similarly, prohibiting Sweeney from disseminating the contents of Evilsizor's phones does not amount to a prohibited restraint of protected speech because Sweeny's conduct constituted "abuse" under the DVPA. (§§ 6203, subd. (d), 6218, subd. (a), 6320, subd. (a).) Sweeney places far too much emphasis on the fact that the trial court specifically declined to address whether Sweeney illegally obtained information from Evilsizor's phones. Regardless whether the data was acquired legally, the trial court was authorized to conclude that its dissemination as we have described was abusive under the DVPA and not the type of speech afforded protection under the First Amendment. (Lemen, supra, 40 Cal.4th at p. 1147.)
Bartnicki v. Vopper (2001) 532 U.S. 514, upon which Sweeney relies, does not compel a contrary conclusion. There, an unidentified person unlawfully intercepted and recorded a telephone call between the president of a local teachers union and a union negotiator involved in contract negotiations with the school board, and several media outlets published the contents of the recording even though they knew or had reason to know the conversation had been illegally obtained. (Id. at pp. 518-519.) The Supreme Court held that under the circumstances the valid privacy interests in a private conversation gave way to the First Amendment protection of truthful speech about a matter of public concern. (Id. at pp. 533-535.) The court specifically declined to address whether the First Amendment would protect unlawfully intercepted messages concerning "domestic gossip or other information of purely private concern." (Id. at p. 533, italics added.) "In doing so, the court recognized that the First Amendment interests served by the disclosure of purely private information . . . are not as significant as the interests served by the disclosure of information concerning a matter of public importance." (DVD Copy Control Assn., Inc. v. Bunner, supra, 31 Cal.4th at p. 883 [affirming preliminary injunction enjoining party from posting on the Internet trade secrets regarding licensed DVD encryption technology].) Here, Sweeney has not identified any public concern in Evilsizor's text messages and other information that he surreptitiously took from her phones.
Sweeney's comparison of this case to situations where parties obtain information from independent sources also misses the mark. He relies on In re Marriage of Candiotti (1995) 34 Cal.App.4th 718, where the trial court entered an order barring an ex-wife in a custody-and-visitation proceeding from disseminating information obtained about her ex-husband's new wife that was acquired both during discovery and also from independent sources. (Id. at pp. 719-721.) Division Three of this court affirmed the portion of the order protecting disclosure of material obtained through discovery. (Id. at p. 726.) As for the portion of the order banning dissemination of material acquired through independent sources, however, the court reversed, holding that the order infringed on the ex-wife's freedom to speak freely about another adult. (Id. at pp. 724-725.) Although it is not entirely clear how the ex-wife obtained the objectionable information, there was no suggestion that it was obtained improperly. (Id. at pp. 720-721 [ex-wife "investigated . . . allegations" learned through anonymous telephone call and "obtained information about [new wife's] driving and personal history"].) Here, by sharp contrast, the trial court determined that Sweeney "committed acts that are restrainable under the [DVPA]." Whether this was a reference to the way in which the data was gathered or the manner in which Sweeney disseminated (or threatened to disseminate) it, we do not believe this abusive conduct is the sort of "independently secured information" to which the Candiotti court afforded constitutional protection. (Id. at p. 722.)
Furthermore, the trial court determined that Sweeney's actions amounted to abuse under the DVPA after a contested hearing. This distinguishes the present case from those in which trial courts enjoined speech before a determination was made that the speech was unprotected. (See, Evans v. Evans (2008) 162 Cal.App.4th 1157, 1161-1162 [the injunction was overbroad and amounted to an invalid prior restraint before trial]. (Id. at pp. 1161-1162; see also Gilbert v. National Enquirer, Inc. (1996) 43 Cal.App.4th 1135, 1145-1146 [preliminary injunction entered before trial that prohibited ex-husband from discussing allegedly defamatory comments about his former spouse, a famous actress, amounted to invalid prior restraint].) The Evans court emphasized, however, that a court may prohibit a party from repeating statements determined at trial to be defamatory, because defamatory statements are not subject to protection under the First Amendment. (Evans, at p. 1162.) Here, the trial court entered an order after a contested hearing where it determined Sweeney committed abuse under the DVPA.
This approach is consistent with well-settled First Amendment jurisprudence. "[A]n injunctive order prohibiting the repetition of expression that ha[s] been judicially determined to be unlawful d[oes] not constitute a prohibited prior restraint of speech." (Lemen, supra, 40 Cal.4th at p. 1153.) For example, following a court trial in Lemen, the trial court determined that the defendant had defamed a restaurant and bar, and it entered a permanent injunction prohibiting the defendant from repeating the defamatory statements. (Id. at pp. 1144-1146.) The Supreme Court held that "an injunction issued following a trial that determined that the defendant defamed the plaintiff that does no more than prohibit the defendant from repeating the defamation, is not a prior restraint and does not offend the First Amendment." (Id. at p. 1148.) " 'Once specified expressional acts are properly determined to be unprotected by the first amendment, there can be no objection to their subsequent suppression or prosecution.' " (Id. at p. 1156.) Likewise in Aguilar, supra, 21 Cal.4th 121, the Supreme Court held that where there has been a judicial determination that the use of racial epithets constitutes employment discrimination, an injunction prohibiting the continued use of those slurs does not violate the right to freedom of speech and does not amount to a prohibited prior restraint of speech. (Id. at pp. 126, 140.)
Thus, the appellate court concluded that the trial court’s order did not violate Sweeney's constitutional rights to free speech.
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At a hearing on April 11, 2014, Sweeney, Evilsizor, and Evilsizor's father testified. Evilsizor testified that it had been "incredibly incredibly difficult to deal with" the dissemination of her personal information, stating, "I have sleepless nights. I'm sick to my stomach. My friends are mad at me, embarrassed as if I let him. I didn't know he was even doing any of this. My parents are upset, you know. Why did I marry him? I didn't know that things were going-I didn't know. Yeah. It's been incredibly challenging to live with." She further testified that she had suffered shock and embarrassment and feared for her safety because of the disclosure. Evilsizor also was concerned about Sweeney's threats to reveal information to the Internal Revenue Service about "things [she] didn't do."
After the close of evidence, the trial court remarked that the narrow issue to decide was whether there was a need to prevent dissemination of the information from Evilsizor's phones. It stressed, "I'm not making any conclusive decision about whether they [the text messages] were properly acquired. I'm not deciding what [e]ffect it has on attorney/client privilege or on the presence of [Sweeney's former attorney] in the case." The court concluded that even if Sweeney legally obtained Evilsizor's information, an issue left unresolved, it was authorized under the DVPA to enjoin the disclosure or threats of disclosure of the information to protect Evilsizor's peace of mind. The court ordered Sweeney be "prohibited from using, delivering, copying, printing or disclosing the messages or content of [Evilsizor's] text messages or e-mail messages or notes, or anything else downloaded from her phone or from what has been called the family computer except as otherwise authorized by the court." Sweeney also was prohibited from trying to access or otherwise interfere with Evilsizor's internet-service provider accounts or social-media accounts. The trial court's order expires on April 11, 2019. Sweeney timely appealed.
At the time Evilsizor sought and obtained the restraining order, the DVPA authorized a trial court "to restrain any person for the purpose of preventing a recurrence of domestic violence and ensuring a period of separation of the persons involved" if evidence showed "reasonable proof of a past act or acts of abuse." (Former § 6300.) A court may issue an order enjoining specific acts of "abuse" (§ 6218, subd. (a)), which are defined as, among other things, behavior that could be enjoined under section 6320. (§ 6203, subd. (d).) Section 6320, in turn, permits a court to enjoin a party from engaging in various types of behavior, including "disturbing the peace of the other party." (§ 6320, subd. (a).) "[T]he plain meaning of the phrase 'disturbing the peace of the other party' in section 6320 may be properly understood as conduct that destroys the mental or emotional calm of the other party." (In re Marriage of Nadkarni (2009) 173 Cal.App.4th 1483, 1497 (Nadkarni).) The phrase includes "destroying the mental or emotional calm of [a former spouse] by accessing, reading and publicly disclosing her confidential e-mails." (Id. at p. 1498.)
The appellate court rejected several arguments from Sweeney. First, the court rejected Sweeney's argument that the trial court misapplied Nadkarni, supra, 173 Cal.App.4th 1483 in determining that Sweeney's actions constituted "abuse" under the DVPA. In Nadkarni, a former wife alleged that her ex-husband had accessed her private e-mail account while she was away on a business trip, then attached copies of the e-mails to documents filed in proceedings regarding custody of their teenaged children. (Id. at pp. 1487-1488.) She sought a permanent restraining order, but the trial court denied it without a hearing after finding that the DVPA did not cover situations in which there was no physical harm alleged. The appellate court reversed and remanded the matter to the trial court for a hearing. It held that the definition of abuse under the DVPA is not limited to the infliction of physical injury or assault. (Id. at pp. 1498, 1501.)
The trial court relied on Nadkarni in ruling that it was not necessary for Evilsizor to prove physical abuse to obtain a restraining order and that "the disclosure of various communications can constitute disturbing the peace of the other party within the meaning of the domestic violence statute." The court ultimately concluded that Sweeney had disturbed Evilsizor's peace under Nadkarni, "because you're going around either disclosing or threatening to disclose to third parties for no particular reason intimate details of your lives, . . . and that's what I think is happening here."
Although a lack of past physical abuse may be considered by a trial court in considering a protective order, the DVPA's definition of abuse "is not confined to physical abuse but specifies a multitude of behaviors which does not involve any physical injury or assaultive acts." (Eneaji v. Ubboe (2014) 229 Cal.App.4th 1457, 1464; see also Burquet v. Brumbaugh, supra, 223 Cal.App.4th at pp. 1142-1143, 1146-1147 [substantial evidence supporting DVPA restraining order where there was no evidence of physical abuse, but restrained party disturbed peace of ex-girlfriend by e-mailing her, sending her text messages, and showing up unannounced at her home]; Conness v. Satram (2004) 122 Cal.App.4th 197, 201-202 [no evidence of physical injury needed under DVPA].)
Second, Sweeney's reliance on S.M. v. E.P. (2010) 184 Cal.App.4th 1249 was unpersuasive. In that case, the appellate court concluded, without analyzing the "disturbing the peace" definition of "abuse" (§ 6320, subd. (a)), that the trial court's description of the restrained party's behavior did not support a finding of abuse. (S.M., at p. 12604.) In fact, the trial court's statement that it would wait to see if there were "more incidents" before it relied on the presumption under section 3044, subdivision (a) that child custody would not be in the best interests of the restrained person's child suggested the trial court believed the restrained person "would have to engage in some additional behavior before the court would find that he engaged in domestic violence." (S.M., at p. 1268, original italics.) Here, by contrast, the trial court specifically found that Sweeney's behavior fell within the DVPA.
At oral argument before the appellate court, Sweeney suggested that his conduct was not sufficiently egregious to warrant the entry of the DVPA order, especially since the order will have the particularly serious consequence of creating a rebuttable presumption in the ongoing child-custody dispute that his child's best interest would not be furthered by him being awarded custody. (§ 3044.)
But the appellate court noted that the presumption is rebuttable by a preponderance of the evidence, and the trial court can and will properly consider and weigh the evidence in the child-custody proceedings to determine whether it should be overcome, taking into account factors that may be favorable to Sweeney (§ 3044, subds. (a)-(b)), understanding that there was no finding Sweeney was physically violent, and focusing on the best interest of the child. The trial court previously has acknowledged the applicable rebuttable presumption at a hearing on April 17, 2014, when it stated that section "3044 says what it says. There is an automatic presumption. It's not a separate finding that I make. That presumption can be rebutted. And we will go through all of that at the appropriate time." (Italics added; see also Keith R. v. Superior Court (2009) 174 Cal.App.4th 1047, 1056 [domestic-violence orders "often must issue quickly and in highly charged situations" but should not be "misuse[d] . . . for tactical reasons"].)
Third, the court rejected Sweeney's argument that insufficient evidence supports the trial court's order. Although the parties disputed certain aspects of the events that led to the issuance of the restraining order, the trial court was in the best position to evaluate credibility and to resolve factual disputes, and our review of the record reveals sufficient evidence to conclude that the court's order was not an abuse of discretion. (Burquet v. Brumbaugh, supra, 223 Cal.App.4th at p. 1143.)
Fourth and finally, the appellate court rejected Sweeney’s argument that the trial court’s order was an improper prior restraint on his constitutional rights to free speech. The appellate court rejected this argument because Sweeney's ability to continue to engage in activity that has been determined after a hearing to constitute abuse is not the type of "speech" afforded constitutional protection.
The First Amendment to the United States Constitution provides: "Congress shall make no law . . . abridging the freedom of speech . . . ." "This fundamental right to free speech applies to the states through the Fourteenth Amendment's due process clause." (Aguilar v. Avis Rent A Car System, Inc. (1999) 21 Cal.4th 121, 133-134 (plur. opn. of George, C.J.) (Aguilar).) " '[P]rior restraints on speech and publication are the most serious and the least tolerable infringement on First Amendment rights.' [Citation.] 'The term prior restraint is used "to describe administrative and judicial orders forbidding certain communications when issued in advance of the time that such communications are to occur." [Citation.] . . . . [P]ermanent injunctions-i.e., court orders that actually forbid speech activities-are classic examples of prior restraints.' " (DVD Copy Control Assn., Inc. v. Bunner (2003) 31 Cal.4th 864, 886, original italics.) " 'The special vice of a prior restraint is that communication will be suppressed, either directly or by inducing excessive caution in the speaker, before an adequate determination that it is unprotected by the First Amendment.' " (Ibid., quoting Pittsburgh Press Co. v. Pittsburgh Comm'n on Human Relations (1973) 413 U.S. 376, 390.)
"Although stated in broad terms, the right to free speech is not absolute." (Aguilar, supra, 21 Cal.4th at p. 134.) " '[T]here are categories of communication and certain special utterances to which the majestic protection of the First Amendment does not extend because they "are no essential part of any exposition of ideas, and are of such slight social value as a step to truth that any benefit that may be derived from them is clearly outweighed by the social interest in order and morality." ' " (Balboa Island Village Inn, Inc. v. Lemen (2007) 40 Cal.4th 1141, 1147 (Lemen), quoting Bose Corp. v. Consumers Union of U.S., Inc. (1984) 466 U.S. 485, 503.) Such categories include libelous speech (Lemen, at p. 1147) and words amounting to employment discrimination (Aguilar, at pp. 134-135, 141-142).
Similarly, prohibiting Sweeney from disseminating the contents of Evilsizor's phones does not amount to a prohibited restraint of protected speech because Sweeny's conduct constituted "abuse" under the DVPA. (§§ 6203, subd. (d), 6218, subd. (a), 6320, subd. (a).) Sweeney places far too much emphasis on the fact that the trial court specifically declined to address whether Sweeney illegally obtained information from Evilsizor's phones. Regardless whether the data was acquired legally, the trial court was authorized to conclude that its dissemination as we have described was abusive under the DVPA and not the type of speech afforded protection under the First Amendment. (Lemen, supra, 40 Cal.4th at p. 1147.)
Bartnicki v. Vopper (2001) 532 U.S. 514, upon which Sweeney relies, does not compel a contrary conclusion. There, an unidentified person unlawfully intercepted and recorded a telephone call between the president of a local teachers union and a union negotiator involved in contract negotiations with the school board, and several media outlets published the contents of the recording even though they knew or had reason to know the conversation had been illegally obtained. (Id. at pp. 518-519.) The Supreme Court held that under the circumstances the valid privacy interests in a private conversation gave way to the First Amendment protection of truthful speech about a matter of public concern. (Id. at pp. 533-535.) The court specifically declined to address whether the First Amendment would protect unlawfully intercepted messages concerning "domestic gossip or other information of purely private concern." (Id. at p. 533, italics added.) "In doing so, the court recognized that the First Amendment interests served by the disclosure of purely private information . . . are not as significant as the interests served by the disclosure of information concerning a matter of public importance." (DVD Copy Control Assn., Inc. v. Bunner, supra, 31 Cal.4th at p. 883 [affirming preliminary injunction enjoining party from posting on the Internet trade secrets regarding licensed DVD encryption technology].) Here, Sweeney has not identified any public concern in Evilsizor's text messages and other information that he surreptitiously took from her phones.
Sweeney's comparison of this case to situations where parties obtain information from independent sources also misses the mark. He relies on In re Marriage of Candiotti (1995) 34 Cal.App.4th 718, where the trial court entered an order barring an ex-wife in a custody-and-visitation proceeding from disseminating information obtained about her ex-husband's new wife that was acquired both during discovery and also from independent sources. (Id. at pp. 719-721.) Division Three of this court affirmed the portion of the order protecting disclosure of material obtained through discovery. (Id. at p. 726.) As for the portion of the order banning dissemination of material acquired through independent sources, however, the court reversed, holding that the order infringed on the ex-wife's freedom to speak freely about another adult. (Id. at pp. 724-725.) Although it is not entirely clear how the ex-wife obtained the objectionable information, there was no suggestion that it was obtained improperly. (Id. at pp. 720-721 [ex-wife "investigated . . . allegations" learned through anonymous telephone call and "obtained information about [new wife's] driving and personal history"].) Here, by sharp contrast, the trial court determined that Sweeney "committed acts that are restrainable under the [DVPA]." Whether this was a reference to the way in which the data was gathered or the manner in which Sweeney disseminated (or threatened to disseminate) it, we do not believe this abusive conduct is the sort of "independently secured information" to which the Candiotti court afforded constitutional protection. (Id. at p. 722.)
Furthermore, the trial court determined that Sweeney's actions amounted to abuse under the DVPA after a contested hearing. This distinguishes the present case from those in which trial courts enjoined speech before a determination was made that the speech was unprotected. (See, Evans v. Evans (2008) 162 Cal.App.4th 1157, 1161-1162 [the injunction was overbroad and amounted to an invalid prior restraint before trial]. (Id. at pp. 1161-1162; see also Gilbert v. National Enquirer, Inc. (1996) 43 Cal.App.4th 1135, 1145-1146 [preliminary injunction entered before trial that prohibited ex-husband from discussing allegedly defamatory comments about his former spouse, a famous actress, amounted to invalid prior restraint].) The Evans court emphasized, however, that a court may prohibit a party from repeating statements determined at trial to be defamatory, because defamatory statements are not subject to protection under the First Amendment. (Evans, at p. 1162.) Here, the trial court entered an order after a contested hearing where it determined Sweeney committed abuse under the DVPA.
This approach is consistent with well-settled First Amendment jurisprudence. "[A]n injunctive order prohibiting the repetition of expression that ha[s] been judicially determined to be unlawful d[oes] not constitute a prohibited prior restraint of speech." (Lemen, supra, 40 Cal.4th at p. 1153.) For example, following a court trial in Lemen, the trial court determined that the defendant had defamed a restaurant and bar, and it entered a permanent injunction prohibiting the defendant from repeating the defamatory statements. (Id. at pp. 1144-1146.) The Supreme Court held that "an injunction issued following a trial that determined that the defendant defamed the plaintiff that does no more than prohibit the defendant from repeating the defamation, is not a prior restraint and does not offend the First Amendment." (Id. at p. 1148.) " 'Once specified expressional acts are properly determined to be unprotected by the first amendment, there can be no objection to their subsequent suppression or prosecution.' " (Id. at p. 1156.) Likewise in Aguilar, supra, 21 Cal.4th 121, the Supreme Court held that where there has been a judicial determination that the use of racial epithets constitutes employment discrimination, an injunction prohibiting the continued use of those slurs does not violate the right to freedom of speech and does not amount to a prohibited prior restraint of speech. (Id. at pp. 126, 140.)
Thus, the appellate court concluded that the trial court’s order did not violate Sweeney's constitutional rights to free speech.
copyright © 2015 Christine Esser
The information contained here is for informational purposes only and is not legal advice or a substitute for legal counsel. Online readers should not act upon this information without seeking professional counsel. Information on this blog is not intended to create, and receipt of it does not constitute, an attorney-client relationship between you and Christine Esser. An attorney-client relationship is only established when a written retainer has been signed.
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Friday, September 25, 2015
When Can a Spousal Support Award Be Modified in California?
Once spousal support has been ordered under Family Code section 4320, once a year either party can request the other party to complete an updated Income and Expense Declaration to determine whether the amount of spousal support should be modified. Spousal support
can be modified when one party establishes there is a material change in circumstances.
A change of circumstances means a reduction or increase in the supporting spouse’s ability to pay and/or an increase or decrease in the supported spouse’s needs. [Citations.] It includes all factors affecting need and the ability to pay.’ [Citation.] ‘A trial court considering whether to modify a spousal support order considers the same criteria set forth in Family Code section 4320 as it considered in making the initial order.’ [Citation.]” (In re Marriage of Dietz (2009) 176 Cal.App.4th 387, 396 [“a court asked to modify spousal support must consider and weigh all of the appropriate spousal support factors” under Family Code section 4320.]) Common changes can include retirement. long-term illness, increase or decrease in employment income, as well as many others.
Under Family Code section 3603, an order of temporary spousal support “may be modified or terminated at any time except as to an amount that accrued before the date of the filing of
the notice of motion or order to show cause to modify or terminate.” (Fam. Code, § 3603
[emphasis added].) “It is well established that even on a showing of changed
circumstances a ‘court may not retroactively modify a prior order for temporary spousal
support.’ [Citations.]” (In re Marriage of Gruen (2011) 191 Cal.App.4th 627, 638.)
“[A] trial court lacks jurisdiction to retroactively modify a pendente lite support order to any date earlier than the date on which a proper pleading seeking modification of such order is filed, unless it specifically reserves jurisdiction to do so.” (In re Marriage of Williamson (2014) 226 Cal.App.4th 1303, 1317.)
copyright © 2015 Christine Esser
The information contained here is for informational purposes only and is not legal advice or a substitute for legal counsel. Online readers should not act upon this information without seeking professional counsel. Information on this blog is not intended to create, and receipt of it does not constitute, an attorney-client relationship between you and Christine Esser. An attorney-client relationship is only established when a written retainer has been signed.
Disclosure: If you click on the Amazon link below, place something in your cart and buy it today, we will receive a small commission that will not increase your cost of the item purchased. This will be used to keep more Family Law Help CA coming your way. Thank you.
can be modified when one party establishes there is a material change in circumstances.
A change of circumstances means a reduction or increase in the supporting spouse’s ability to pay and/or an increase or decrease in the supported spouse’s needs. [Citations.] It includes all factors affecting need and the ability to pay.’ [Citation.] ‘A trial court considering whether to modify a spousal support order considers the same criteria set forth in Family Code section 4320 as it considered in making the initial order.’ [Citation.]” (In re Marriage of Dietz (2009) 176 Cal.App.4th 387, 396 [“a court asked to modify spousal support must consider and weigh all of the appropriate spousal support factors” under Family Code section 4320.]) Common changes can include retirement. long-term illness, increase or decrease in employment income, as well as many others.
Under Family Code section 3603, an order of temporary spousal support “may be modified or terminated at any time except as to an amount that accrued before the date of the filing of
the notice of motion or order to show cause to modify or terminate.” (Fam. Code, § 3603
[emphasis added].) “It is well established that even on a showing of changed
circumstances a ‘court may not retroactively modify a prior order for temporary spousal
support.’ [Citations.]” (In re Marriage of Gruen (2011) 191 Cal.App.4th 627, 638.)
“[A] trial court lacks jurisdiction to retroactively modify a pendente lite support order to any date earlier than the date on which a proper pleading seeking modification of such order is filed, unless it specifically reserves jurisdiction to do so.” (In re Marriage of Williamson (2014) 226 Cal.App.4th 1303, 1317.)
copyright © 2015 Christine Esser
The information contained here is for informational purposes only and is not legal advice or a substitute for legal counsel. Online readers should not act upon this information without seeking professional counsel. Information on this blog is not intended to create, and receipt of it does not constitute, an attorney-client relationship between you and Christine Esser. An attorney-client relationship is only established when a written retainer has been signed.
Disclosure: If you click on the Amazon link below, place something in your cart and buy it today, we will receive a small commission that will not increase your cost of the item purchased. This will be used to keep more Family Law Help CA coming your way. Thank you.
Wednesday, September 2, 2015
In re Marriage of Brandes: Community Property Law As Applied to Wealthy People
In this dissolution action, In re Marriage of Brandes (2015) __Cal.App.4th_, Linda F. Brandes (Linda) seeks more money, contending primarily that the trial court did not apply the law correctly in dividing their community property and that some stock Charles H. Brandes (Charles) acquired during their marriage should be deemed to be community property, whereas, Charles disputes the trial court’s generous award of spousal support to Linda.
To resolve the community property issues, the appellate court was tasked with deciding if the trial court applied the correct approach in distributing the couple’s property. The Pereira v. Pereira (1909) 156 Cal. 1 (Pereira) approach was used for the early period during which the growth was primarily attributable to Charles’s personal efforts. The trial court also used the the Van Camp v. Van Camp (1921) 53 Cal.App. 17 (Van Camp) approach for the later period during which the growth was primarily attributable to other factors.
The Pereira approach allocates a fair return to the separate property investment and the balance of growth to the community, and the Van Camp approach allocates the reasonable value of the owner spouse's services to the community and the balance of growth to separate property. (In re Marriage of Dekker (1993) 17 Cal.App.4th 842, 853-854 (Dekker).) The appellate court explained that when a spouse's personal efforts increase the value of his or her separate property business, "it becomes necessary to quantify the contributions of the separate capital and community effort to the increase," because the "community is entitled to the increase in profits attributable to the community endeavor." (Dekker, supra, 17 Cal.App.4th at p. 851; Beam, supra, 6 Cal.3d at p. 17.)
California courts have developed two alternative approaches to allocating business profits between separate and community estates. (Dekker, at pp. 852-853, fn. omitted.) "Pereira is typically applied where business profits are principally attributed to efforts of the community." (Dekker, supra, 17 Cal.App.4th at p. 853.) "The Pereira approach is to allocate a fair return to the separate property investment and allocate the balance of the increased value to community property as arising from community efforts." (Id. at pp. 852-853.) In a Pereira allocation, the court need not "limit the community interest to a salary as reward for a spouse's efforts . . . ." (Id. at p. 853.) "To limit the community to compensation received by way of salary during the marriage would ignore California's egalitarian marriage model and the apportionment formula of Pereira . . . ." (Id. at p. 854.)
"Conversely, Van Camp is applied where community effort is more than minimally involved in a separate business, yet the business profits accrued are attributed {Slip Opn. Page 13} to the character of the separate asset." (Dekker, supra, 17 Cal.App.4th at p. 853.) "The Van Camp approach is to determine the reasonable value of the community's services, allocate that amount to community property and the balance to separate property." (Ibid.) Although the appellate court found no error with how the trial court applied the law to distribute most of the couple’s community property. it did find error with regard to the distribution of some stock that Charles acquired during the marriage.
Linda contends the court erred by awarding Charles the 10,000 shares of BIP stock he purchased from Brown. In 1985, before the marriage, Brown, a client of BIP, purchased 10 percent of the business, which after stock splits gave him 10,000 shares of stock. That year, he and Charles entered into a shareholder agreement that gave Charles the option to purchase any or all of Brown's shares after April 1, 1990. The agreement included a formula for the purchase price, and called for a minimum down payment of 20 percent and a promissory note to cover the balance. {Slip Opn. Page 26}
In 1994, Charles exercised the option for 4,000 shares at a price of $240,000. He signed an unsecured promissory note. He made all payments from the parties' joint accounts with funds designated as W-2 income. The stock purchase agreement provided that the 1985 shareholder agreement would be superseded by a new 1994 shareholder agreement "with respect to the 6,000 shares still owned by Brown."
In 1996, Charles and Brown entered into another shareholder agreement, which restated and amended the 1994 shareholder agreement. fn. 7 The new agreement gave Charles the option of purchasing the shares after the 10th anniversary of the agreement. It included a formula for the purchase price, and called for a minimum down payment of 25 percent and a promissory note to cover the balance. It provided that the security for the note would be the shares themselves. {Slip Opn. Page 27}
In 2002, Busby asked Brown to sell his remaining 6,000 shares of stock to Charles, and Brown agreed even though the 10-year period had not run. It appears that Charles made a down payment of $4,667,147. fn. 8 A promissory note in the amount of $18,668,588.80 was signed by Charles individually, and by Charles and Linda as trustees and beneficiaries of a family trust. He made the down payment with funds labeled as W-2 income, and note payments from a combination of funds labeled as W-2 income and profit distributions apparently not labeled as W-2 income. The payments came from the parties' joint accounts.
Linda contends the court erred by rejecting her argument that the 6,000 shares are community property under the lender's intent doctrine, since the stock was acquired partially on credit during the marriage. "There is a rebuttable presumption that property acquired on credit during marriage is community so that '[i]n the absence of evidence tending to prove that the seller . . . primarily relied upon the purchaser's separate property in extending credit, the trial court must find in accordance with the presumption.' " (Bank of California v. Connolly (1973) 36 Cal.App.3d 350, 375-376; Gudelj v. Gudelj (1953) 41 Cal.2d 202, 210 (Gudelj).) The "presumption is rebuttable upon a showing that the loan was extended on the faith of existing property belonging to the acquiring spouse." (In re Marriage of Stoner (1983) 147 Cal.App.3d 858, 864.) {Slip Opn. Page 31} Evidence of lender reliance on a spouse's separate property may be either direct or circumstantial. (Grinius, supra, 166 Cal.App.3d at p. 1187.)
The court declined to apply the lender's intent doctrine, in part because the "evidence is unclear whether there was a lender-borrower relationship between Brown and Charles . . . " Brown was asked whether he considered himself to be in a debtor-creditor relationship with Charles, and he testified, "I never really thought about it." He also stated he did not consider himself a lender because he and Charles had a contractual arrangement for Charles's purchase of the shares. fn. 11
The appellate court agreed with Linda’s assertion that the court erred as a matter of law by finding the lack of a debtor-creditor relationship for purposes of the lender's intent doctrine. "To be sure, 'A loan transaction contemplates a debtor-creditor relationship with an obligation of the "debtor" to repay the amount of the loan to the creditor. . . .' " (Ghirardo v. Antonioli (1994) 8 Cal.4th 791, 802.) The appellate court saw no reason to disregard the lender's intent doctrine based on a seller's testimony he did not consider himself a lender. The issue is one of law drawn from the promissory note, not one for Brown's opinion.
The appellate court explained that they had not been cited to any authority for the proposition that an option agreement anticipating a promissory note precludes the creation of a debtor-creditor relationship on execution of the note. {Slip Opn. Page 32}
Additionally, Linda contends the court erred by denying her prejudgment interest on her share of the community's interest in BIP as of the end of the Pereira period, by {Slip Opn. Page 3} characterizing profit distributions BIP labeled as W-2 income as Charles's separate property, and by awarding Charles 10,000 shares of BIP stock he purchased from a third party in two transactions during the marriage. Linda claims 4,000 of the shares are community property because Charles used community funds to purchase them. She asserts the remaining 6,000 shares are presumptively community property under the lender's intent doctrine, because the purchase was financed under a promissory note entered into during the marriage, and Charles did not rebut the presumption by showing the seller relied primarily on his separate property for payment.
The community's ownership interest, however, does not extend to the entire 6,000 shares, but only to the number of shares purchased under the promissory note, which is unclear from the record. The lender's intent doctrine "applies only to the characterization of loan proceeds obtained during marriage." (In re Marriage of Starr (2010) 189 Cal.App.4th 277, 288.) Charles rebutted the general community property presumption as to the down payment (§ 760), by tracing it to his separate property. (Gudelj, supra, "41 Cal.2d at pp. 209-211 [husband rebutted presumption of community property as to 3/23 of business interest by tracing down payment to his separate property]; In re Marriage of Aufmuth (1979) 89 Cal.App.3d 446, 455, disapproved of on another point in In re Marriage of Lucas (1980) 27 Cal.3d 808, 858 ["there is substantial evidence to support the trial court's finding that the down payment was and continued to be separate property interest held by wife in the residence"].) Charles separately owns the percentage of {Slip Opn. Page 34} shares purchased with his down payment. For example, if the down payment was 25 percent of the full purchase price, he separately owns 1,500 shares. Thus, the appellate court partially agreed with Linda on the lender's intent doctrine.
The doctrine applies to the percentage of the 6,000 shares purchased under the promissory note, and the court erred by not finding in accordance with the community property presumption since Charles did not rebut it.
On Charles’ appeal, which contends the court erred by awarding Linda $450,000 per month in spousal support, asserting that under Family Code section 4322, she is not entitled to any support because, if invested prudently, her share of the community property is sufficient to cover her actual postseparation expenses of approximately $100,000 per month, the appellate court declined to rule on this issue. The court explained that this issue will likely become moot. On remand, the trial court must revisit the spousal support issue because this order is based, in part, on a spouse's separate estate (§ 4320, subd. (e)), and Linda's separate estate will likely increase when the trial court redistributes the community property from the loans.
copyright © 2015 Christine Esser
The information contained here is for informational purposes only and is not legal advice or a substitute for legal counsel. Online readers should not act upon this information without seeking professional counsel. Information on this blog is not intended to create, and receipt of it does not constitute, an attorney-client relationship between you and Christine Esser. An attorney-client relationship is only established when a written retainer has been signed.
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To resolve the community property issues, the appellate court was tasked with deciding if the trial court applied the correct approach in distributing the couple’s property. The Pereira v. Pereira (1909) 156 Cal. 1 (Pereira) approach was used for the early period during which the growth was primarily attributable to Charles’s personal efforts. The trial court also used the the Van Camp v. Van Camp (1921) 53 Cal.App. 17 (Van Camp) approach for the later period during which the growth was primarily attributable to other factors.
The Pereira approach allocates a fair return to the separate property investment and the balance of growth to the community, and the Van Camp approach allocates the reasonable value of the owner spouse's services to the community and the balance of growth to separate property. (In re Marriage of Dekker (1993) 17 Cal.App.4th 842, 853-854 (Dekker).) The appellate court explained that when a spouse's personal efforts increase the value of his or her separate property business, "it becomes necessary to quantify the contributions of the separate capital and community effort to the increase," because the "community is entitled to the increase in profits attributable to the community endeavor." (Dekker, supra, 17 Cal.App.4th at p. 851; Beam, supra, 6 Cal.3d at p. 17.)
California courts have developed two alternative approaches to allocating business profits between separate and community estates. (Dekker, at pp. 852-853, fn. omitted.) "Pereira is typically applied where business profits are principally attributed to efforts of the community." (Dekker, supra, 17 Cal.App.4th at p. 853.) "The Pereira approach is to allocate a fair return to the separate property investment and allocate the balance of the increased value to community property as arising from community efforts." (Id. at pp. 852-853.) In a Pereira allocation, the court need not "limit the community interest to a salary as reward for a spouse's efforts . . . ." (Id. at p. 853.) "To limit the community to compensation received by way of salary during the marriage would ignore California's egalitarian marriage model and the apportionment formula of Pereira . . . ." (Id. at p. 854.)
"Conversely, Van Camp is applied where community effort is more than minimally involved in a separate business, yet the business profits accrued are attributed {Slip Opn. Page 13} to the character of the separate asset." (Dekker, supra, 17 Cal.App.4th at p. 853.) "The Van Camp approach is to determine the reasonable value of the community's services, allocate that amount to community property and the balance to separate property." (Ibid.) Although the appellate court found no error with how the trial court applied the law to distribute most of the couple’s community property. it did find error with regard to the distribution of some stock that Charles acquired during the marriage.
Linda contends the court erred by awarding Charles the 10,000 shares of BIP stock he purchased from Brown. In 1985, before the marriage, Brown, a client of BIP, purchased 10 percent of the business, which after stock splits gave him 10,000 shares of stock. That year, he and Charles entered into a shareholder agreement that gave Charles the option to purchase any or all of Brown's shares after April 1, 1990. The agreement included a formula for the purchase price, and called for a minimum down payment of 20 percent and a promissory note to cover the balance. {Slip Opn. Page 26}
In 1994, Charles exercised the option for 4,000 shares at a price of $240,000. He signed an unsecured promissory note. He made all payments from the parties' joint accounts with funds designated as W-2 income. The stock purchase agreement provided that the 1985 shareholder agreement would be superseded by a new 1994 shareholder agreement "with respect to the 6,000 shares still owned by Brown."
In 1996, Charles and Brown entered into another shareholder agreement, which restated and amended the 1994 shareholder agreement. fn. 7 The new agreement gave Charles the option of purchasing the shares after the 10th anniversary of the agreement. It included a formula for the purchase price, and called for a minimum down payment of 25 percent and a promissory note to cover the balance. It provided that the security for the note would be the shares themselves. {Slip Opn. Page 27}
In 2002, Busby asked Brown to sell his remaining 6,000 shares of stock to Charles, and Brown agreed even though the 10-year period had not run. It appears that Charles made a down payment of $4,667,147. fn. 8 A promissory note in the amount of $18,668,588.80 was signed by Charles individually, and by Charles and Linda as trustees and beneficiaries of a family trust. He made the down payment with funds labeled as W-2 income, and note payments from a combination of funds labeled as W-2 income and profit distributions apparently not labeled as W-2 income. The payments came from the parties' joint accounts.
Linda contends the court erred by rejecting her argument that the 6,000 shares are community property under the lender's intent doctrine, since the stock was acquired partially on credit during the marriage. "There is a rebuttable presumption that property acquired on credit during marriage is community so that '[i]n the absence of evidence tending to prove that the seller . . . primarily relied upon the purchaser's separate property in extending credit, the trial court must find in accordance with the presumption.' " (Bank of California v. Connolly (1973) 36 Cal.App.3d 350, 375-376; Gudelj v. Gudelj (1953) 41 Cal.2d 202, 210 (Gudelj).) The "presumption is rebuttable upon a showing that the loan was extended on the faith of existing property belonging to the acquiring spouse." (In re Marriage of Stoner (1983) 147 Cal.App.3d 858, 864.) {Slip Opn. Page 31} Evidence of lender reliance on a spouse's separate property may be either direct or circumstantial. (Grinius, supra, 166 Cal.App.3d at p. 1187.)
The court declined to apply the lender's intent doctrine, in part because the "evidence is unclear whether there was a lender-borrower relationship between Brown and Charles . . . " Brown was asked whether he considered himself to be in a debtor-creditor relationship with Charles, and he testified, "I never really thought about it." He also stated he did not consider himself a lender because he and Charles had a contractual arrangement for Charles's purchase of the shares. fn. 11
The appellate court agreed with Linda’s assertion that the court erred as a matter of law by finding the lack of a debtor-creditor relationship for purposes of the lender's intent doctrine. "To be sure, 'A loan transaction contemplates a debtor-creditor relationship with an obligation of the "debtor" to repay the amount of the loan to the creditor. . . .' " (Ghirardo v. Antonioli (1994) 8 Cal.4th 791, 802.) The appellate court saw no reason to disregard the lender's intent doctrine based on a seller's testimony he did not consider himself a lender. The issue is one of law drawn from the promissory note, not one for Brown's opinion.
The appellate court explained that they had not been cited to any authority for the proposition that an option agreement anticipating a promissory note precludes the creation of a debtor-creditor relationship on execution of the note. {Slip Opn. Page 32}
Additionally, Linda contends the court erred by denying her prejudgment interest on her share of the community's interest in BIP as of the end of the Pereira period, by {Slip Opn. Page 3} characterizing profit distributions BIP labeled as W-2 income as Charles's separate property, and by awarding Charles 10,000 shares of BIP stock he purchased from a third party in two transactions during the marriage. Linda claims 4,000 of the shares are community property because Charles used community funds to purchase them. She asserts the remaining 6,000 shares are presumptively community property under the lender's intent doctrine, because the purchase was financed under a promissory note entered into during the marriage, and Charles did not rebut the presumption by showing the seller relied primarily on his separate property for payment.
The community's ownership interest, however, does not extend to the entire 6,000 shares, but only to the number of shares purchased under the promissory note, which is unclear from the record. The lender's intent doctrine "applies only to the characterization of loan proceeds obtained during marriage." (In re Marriage of Starr (2010) 189 Cal.App.4th 277, 288.) Charles rebutted the general community property presumption as to the down payment (§ 760), by tracing it to his separate property. (Gudelj, supra, "41 Cal.2d at pp. 209-211 [husband rebutted presumption of community property as to 3/23 of business interest by tracing down payment to his separate property]; In re Marriage of Aufmuth (1979) 89 Cal.App.3d 446, 455, disapproved of on another point in In re Marriage of Lucas (1980) 27 Cal.3d 808, 858 ["there is substantial evidence to support the trial court's finding that the down payment was and continued to be separate property interest held by wife in the residence"].) Charles separately owns the percentage of {Slip Opn. Page 34} shares purchased with his down payment. For example, if the down payment was 25 percent of the full purchase price, he separately owns 1,500 shares. Thus, the appellate court partially agreed with Linda on the lender's intent doctrine.
The doctrine applies to the percentage of the 6,000 shares purchased under the promissory note, and the court erred by not finding in accordance with the community property presumption since Charles did not rebut it.
On Charles’ appeal, which contends the court erred by awarding Linda $450,000 per month in spousal support, asserting that under Family Code section 4322, she is not entitled to any support because, if invested prudently, her share of the community property is sufficient to cover her actual postseparation expenses of approximately $100,000 per month, the appellate court declined to rule on this issue. The court explained that this issue will likely become moot. On remand, the trial court must revisit the spousal support issue because this order is based, in part, on a spouse's separate estate (§ 4320, subd. (e)), and Linda's separate estate will likely increase when the trial court redistributes the community property from the loans.
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